Preparing for the Connected Devices ExplosionOperator challenges & key business issues

Divna Vuckovic, ericssonBusiness development directorRegion Mediterranean

2011-09-21 | Page 2

Online homes

Personalnetwork

Intelligenttransport

Smartutilities

Industry& society

People

Business Society

50 billion connected devices 2020

>1 billion vehicles

>100 billion embedded processors shipped (cumulative)

>3 billion utility meters

3 billion middleclass consumers

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Three waves of connected devices

1st wave

3rd wave

2nd wave

NetworkedConsumer Electronics

Networked Verticals 2.0Industries

Networked Everything Networked Society

Increased process efficiency

Increased proposition reach

Increased human effectiveness

Improved value propositions –consumer lifestyle

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Where the third wave of connections will come from?

2020 Connected Devices

50 BILLION CONNECTED DEVICES:• ~10 billion connections are assumed to come from phones and mobile broadband. • The remainder must come from new categories -connected devices beyond people. 7+ B

3 B

3-4 B

M2M

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M2m market explosion

m2m - mobile and Fixed connected Devices M2M Monthly ARPU by segment(2010, Wireless devices only, average worldwide)

2010 2011 2012 2013 2014 2015 2016

Million Unit

5,000

4,000

3,000

2,000

1,000

0

+60%

CAGR

On average the number of M2M connections is forecasted to grow by approximately 60% each

year

0 10 20 30 40 50

1.8

Security 5.537.5

Utility1.0

4.8

Green Tech 8.614.6

Transport/Vehicles 6.2

Retail Outlets$

7.3

Maintenance 0.6

1.51.5

Building Automation 5.5

6.8

Healthcare 5.048.9

Service ARPUNetwork ARPU

ARPUs for all segments, excluding healthcare, forecasted to fall by 37% for network connectivity and

by 38% for service provision over 10 year

Source: MWC Connected Devices; Strategy Analytics; Ericsson Analysis

M2M opportunities for operators in variety of roles Efficiency and simple business model are critical to grow with good margins

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The mobile network…

…is the most ubiquitous communication network

we have

…applications have limitless reach

…is available and will be in operation for a long

time

…will transition in a structured way

…users can focus on application, not

connectivity

…well defined application enablement

…will scale with cost-efficiency and

maintained performance

… the global vehicle for 50B connected devices

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Market perception M2M challenges

PRODUCT LIFECYCLE MISMATCH

MARKET PERCEPTION CHALLENGES

BUSINESS MODEL CHALLENGES

SCALE BUSINESS AND YOUR NETWORK FOR M2M

OPTIMIZED FOR M2M

BUSINESS MODELS COMPLETELY DIFFERENT

NON CORE OF MNO BUSINESS

Bn

0

50

2007 2020

M2M

HUGE ROAMING COSTS CUSTOMER

OWNERSHIP

PROFITABILITY

OPTIMIZED M2M STRATEGY

Is operator’s business and network ready to scale billions of connections?

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Key operational processes, from business strategy to system support

Strategy Formulation

Commercial offering

Technical Architecture & Implementation

Operations

Conceptual overview of operational processes –varies operator-by-operator basis

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technical architecture & implementation

Considerations –vertical business:

› Vertical solutions are often very diverse:› Consists of various technologies &

applications

› Customization & complex integration:› Long integration time, typically 6-24

months per customer

› New requirements: › Billing, provisioning, roaming etc. › E.g. devices & SIM cards to tolerate

vibration, humidity and high temperatures

What are the current technical capabilities and do they fulfill the customers needs?

Solution diversity

Customization

Complex integrations

New requirements

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operations

Considerations –vertical business:

› M2M ARPU often 10% of mobile ARPU:› Challenge to cut & maintain low OPEX

› Process optimization through outsourcing

› Business critical solutions:› 7/24 hour support required end-to-end

› Solutions have to work end-to-end:› Management of 3rd party solutions

Many choices in complex operational environment, which are the key opportunities for you to improve operational efficiency?

High volume, low ARPU business

Operational efficiency

End-to-end support

Partner management

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Handle Device

scale

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M2M scaling challenges

DEVICES WITH DIFFERING DATA

DEMANDS

M2M DEMANDSWHERE ARE THE CHALLENGES?

E2E QoS ON CRITICAL M2M SOLUTIONS

ABUSIVE M2M DEVICES SIGNALING

THE NETWORK

SCALE BUSINSS AND YOUR NETWORK FOR M2M

OPTIMIZED FOR M2M

0

50 Bn

2007 2020

M2M

LIMITED REVENUE PER CONNECTION SCALING NETWORK

CAPACITY

M2M ROAMING

OPTIMIZED M2M STRATEGY

Is your business and network ready to scale billions of connections?

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Mobile Networks Meet the Demands of 50B

CORE

SERVICE LAYER

- INTERNET- WIRELINE- WIRELESSCARRIER

• Huge amount of devices, applications, vendors• Non-homogenous requirements• Different traffic models

• Number of concurrent users• Coverage requirements• Massive data volumes

• Transport capability• Shrinking RNSs• Signaling load• Simultaneous growth in all dimensions

RAN • Users always connected• RAN backhaul capacity• Network scalability

• Cloud computing efficiency• Protecting vertical markets• Business models• Transparency• Charging

2011-09-21 | Page 14SECURE END-TO-END NETWORK CAPACITY

M2M NETWORK CAPACITY

RAN CORE SERVICE LAYER

- INTERNET- WIRELINE- WIRELESSCARRIER

Forecast

Plan & Design

Deploy

Measure & Tune

P2P (6B) M2m (50B)

Terminal Distribution, User Pattern, Trends & Application Characteristics

Device Characteristics & Growth, Application Characteristics & Traffic Model

Long term planning, Optimal Design & End-User Performance

Optimal Network Utilization, Key Capacity Indicators & In-service Perf.

Secure E2E Network Capacity, Quality Focus & Flawless Execution

Secure E2E Network Capacity, Adherence to Methods & Procedures

Monitor alignment to predicted result, Update model & ensure capacity margin

Monitor resource utilization, tune based on trends & intelligent mgmt. of devices

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Managing the Smart Phone Experience

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Beyond Smartphone, Managing M2M Performance

“The Heart rate monitor has to work at the same Time as the you tube

video”

Network PlanningQOS

DEVICES WITH DIFFERING DATA DEMANDS (EXAMPLE)

LONG TERM FORECASTING CAN REDUCE WASTED SPEND!

HighLow

Smart Meters (PTP) Transport Logistics Health Monitoring

Usage: Data volume per session, Number of sessions, Interval between sessions

Device Types, Number of Devices

Mobility Aspects

Throughput, Latency, Reliability, Security & Coverage Requirements

…..

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Ensure solution meets requirements and aligned with customer expectations

- Trend Analysis, Traffic Model

- Capacity & Performance Targets

- Device & Application Characteristics

- Network Evolution Strategy

- Trend Analysis, Traffic Model

- Capacity & Performance Targets

- Device & Application Characteristics

- Network Evolution Strategy

Kickoff and Initial discussions

Kickoff and Initial discussions

Review SolutionCustomer Approval for recommended solution

Customer Approval for recommended solution

GUARANTEEING THE DEVICE EXPERIENCE!

- Requirements Analysis

- Design Considerations

- Develop Traffic Forecast

- Develop Load Forecasts for Network Nodes & Interfaces

- Build High level plan for Network Evolution

- Deployment roadmap for capacity augmentation

Review of Traffic Forecasts & Network Capacity Requirements

Review of Traffic Forecasts & Network Capacity Requirements

Joint review with customer

Joint review with customer

Model for optimal utilization (load balancing & Rehomes)

Perform Bottleneck analysis to improve service quality / device experience

Validate network impact, based on forecast

IterateIterate

- Review Solution with customer

- Address concerns and align with customer input

- Review Solution with customer

- Address concerns and align with customer input

Document guidelines & best practices

MANAGING DEVICE EXPERIENCE IS A CONTINUOUS BEST PRACTICE ACTIVITY

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M2M Service quality optimization

> Deliver observability on device experience> Discover requirements of M2M> Understand impact of network

performance on device experience> Identify performance bottlenecks

Our Approach

Performance Issues

› Like finding needle in a haystack. › A variety of devices with many different

requirements

› Passive probing: track each device/ application › Assess network performance vs. expectations

Value

MANAGING DEVICE EXPERIENCE IS THE KEY

2011-09-21 | Page 19